When it comes to financial planning, success can be driven by many factors, but three common mistakes can easily derail you. While they can all be addressed to keep you on track, be sure that you don’t fall into the trap of these mistakes.
Lacking a comprehensive plan
Just as a football coach wouldn’t start a game with only the quarterback and center on the field, you should not approach financial planning without bringing all aspects of your financial life to the table and considering how they impact each other and your goals. Not considering the full picture can lead to inefficiently using your resources, experiencing redundancies or conflicts in decisions and overlooking risks.
To avoid this, make sure you have a comprehensive financial plan that considers all elements of your financial life — cash flow, investments, risk management, taxes, retirement and estate planning — to ensure you have the whole team playing for your benefit.
Ignoring risk management
Often in financial planning, the focus is put on saving and growing your wealth. But if you overlook how to protect what you’ve built, the results could be devastating. Just as important as starting early and choosing the right investments, is the need to address risks such as job loss, emergency expenditures, health issues, disability and death. Having the proper protections in place can safeguard your financial plan and probability of success. Here are a few questions to ask as you mitigate risk:
▪ Do I have enough in emergency savings?
▪ Is my life insurance policy able to cover my debts if something were to happen to me?
▪ Will my family or loved ones know what my wishes are if I am unable to make decisions for myself?
Leaving the plan stagnant
A financial plan is not a one-and-done exercise. It is living, breathing and should be updated whenever big life events happen — job change or loss, marriage or divorce, birth of a child, death, inheritance and along with many other noteworthy milestones. When working with a financial advisor, it is imperative to keep him or her updated on these life changes as they happen so that your plan can be adjusted however necessary. Regular touch bases with your financial advisor can help ensure your plan remains nimble and relevant.
Liz Trimble is a Wealth Advisor and Director of Client Service at Trimble Wealth Advisors in Overland Park. Investment advisory services offered through CWM, LLC, an SEC Registered Investment Advisor. Carson Partners, a division of CWM, LLC, is a nationwide partnership of advisors.
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